AT&T-Time Warner antitrust suit leaves tech firms wary

Craig Timberg, The Washington Post

November 21, 2017

The nation's technology industry at first glance looked like a winner in the Justice Department's move this week to block AT&T's acquisition of Time Warner. A merged company probably would be a stronger company, allowing it to control, for example, both the creation of "Game of Thrones" and the delivery of episodes to millions of fans.

Stopping that merger, experts say, stands to help potential rivals, including a cohort of ambitious tech companies - such as Google, Facebook and Amazon - that in recent years have forced their way into the battle for American entertainment dollars.

But whatever the stakes in that merger fight, more aggressive federal enforcement of antitrust laws may not prove to be good news for tech giants that have grown wildly profitable over the past decade as they've squashed some rivals while gobbling up others.

Many of those acquisitions faced government review but ultimately were permitted in an era when federal officials drew criticism for not more forcefully challenging burgeoning monopolies. If antitrust enforcement is taking a more aggressive turn under the Trump administration, such companies could find themselves in the government's sights, say experts.

"An administration that was interested in looking at monopolistic practices would have a very rich field," said Lina Khan, legal policy director for the Open Markets Institute, a think tank. "If you're a big tech company, the best antitrust enforcement policy is no antitrust enforcement policy."

President Donald Trump appeared to endorse the Justice Department's action Tuesday, telling reporters: "I'm not going to get involved in litigation. But personally, I've always felt that that was a deal that's not good for the country. I think your pricing is going to go up. I don't think it's a good deal for the country."

The Justice Department's suit against AT&T, filed Monday, marked a break from the recent past of federal antitrust enforcement. Not for several decades had the government filed suit to stop a "vertical" merger, one between companies that aren't in the same business. ("Horizontal" mergers, such as AT&T's 2011 effort to buy fellow wireless carrier T-Mobile, are more common targets for antitrust enforcement. Federal officials blocked that deal).

Monday's lawsuit also was the first major action for Makan Delrahim, Trump's appointee to head the Justice Department's antitrust division. He was confirmed by the Senate in September.

Amazon won approval for its purchase of grocer Whole Foods in August from the Federal Trade Commission, which shares responsibility for antitrust enforcement with the Justice Department. That deal sparked criticism from some antiantitrust experts, who warned about the dangers of allowing powerful tech companies to spread their market power into other parts of the economy.

Translator

To read this article in one of Houston's most-spoken languages, click on the button below.

That deal was the latest of many tech acquisitions to survive federal scrutiny. Facebook acquired Instagram in 2012 and Whatsapp in 2014. Google acquired YouTube in 2006 and ITA, an airfare search engine, in 2011. Google also emerged from antitrust scrutiny by the FTC in 2013 after agreeing to modest concessions.

The possibility of stricter federal enforcement caught the attention of many in Silicon Valley, where companies frequently change hands as they grow from startups to bigger firms, allowing early investors to collect profits and potentially reinvest them. "It's very troublesome," said Joe Horowitz, managing general partner of Icon Ventures, of the suit against AT&T. "If the government is going to start to interfere with mergers that are more vertically integrated, it is worrisome because mergers are an important element of how Silicon Valley works."

AT&T's deal for Time Warner presents some particular issues, including the Justice Department's argument that prices would inevitably rise for consumers, a key concern in antitrust law. But some experts also see the possibility of a broader ideological shift in how the federal government views the rising consolidation and power of tech companies.

"This signals an active Justice Department, and that can't be great news for a company like Facebook, which has a pretty well-known reputation for wiping out its competitors," said Columbia University law professor Tim Wu, the author of "The Attention Merchants." "Both Google and Amazon ring a few bells, but I think Facebook rings the most."

As the AT&T-Time Warner case unfolds, the market power of tech companies is likely to be a major subject of debate. Even though Google, Amazon and Facebook operate mainly in different parts of the tech industry, AT&T chief executive Randall Stephenson singled out these companies as key competitors at a conference hosted by the New York Times this month.

"What we're trying to do is build a platform that gives us an opportunity to compete with those guys," Stephenson said. "These folks - Amazon, Google, Facebook - have created some amazing franchises. What we're doing here is building something that we hope will give us a shot at competing with them."

The underlying issue, experts say, is that all of these companies are competing for Americans' attention. Amazon, though best known for its online retail business, delivers movies, television shows and music through streaming services. Google does the same through YouTube and other streaming services. Facebook delivers mainly videos uploaded by users, but it has begun to produce some of its own online content.

All of these companies ultimately compete for users' time, which they could otherwise spend watching shows produced by Time Warner properties such as CNN or HBO, or by other content producers delivering material over AT&T's cable network, its wireless services or DirecTV, which AT&T bought in 2015.

Dallas Mavericks owner Mark Cuban, who has investments in Amazon and Netflix, tweeted Monday evening that Google and Facebook would be "the big losers" in the Justice Department lawsuit against AT&T. These companies, Cuban said, would face increased scrutiny because of their powerful positions in advertising, content creation and distribution. He said that, more than most people understand, AT&T is in the same business as the tech companies - fighting for Americans' eyeballs at a time when traditional television viewing is in decline.

"It's getting harder and harder to create substantial hits," said Cuban, who said time once spent watching TV shows is now going to the offerings of tech companies. "You're not seeing a boom in playground or jogging trail usage during prime time."